Cramer's Mad Money - Cramer, the Fundamentalist (1/12/09)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday January 12.

Fundamentals vs. technicals: Potash (POT)

While Cramer’s habit has been to look at fundamentals rather than charts, it is a chartists market out there, so Cramer has dedicated the week to comparing the technical to the fundamental approach for the market’s 5 top charts. Potash has not declined following a 60% surge between December 4 and December 12 (apart from a 12% decline on Monday following a negative report on corn prices, but Potash was not the only stock to dip.) The fact that there was no decline since the jump, but a 5% move shows that investors, rather than traders, are picking up Potash. The chart also shows shareholders are not taking profits in rallies, but are holding the stock. However, Cramer pointed out a weakness with the technical approach. The stock’s low is at $65 and technicians would be considered right only if the stock stays above $65. However, Cramer’s approach is that if a stock is attractive at $65, it is even more attractive at a lower price, at a level a technician would abandon the stock. Cramer’s criticism with technical analysis is that it often encourages investors to buy high and sell lower.

However, according to the fundamentals, Potash is a buy. The estimates are low, supply and demand are pushing prices higher and Monsanto’s strong earnings may pave the way for Potash. In addition, Obama is not showing signs of abandoning the ethanol mandate. Even though both the chart and fundamentals are solid, Cramer would not buy Potash, but prefers Terra Nitrogen, which fared best in the agriculture decline on Monday, has a generous 15% dividend and is more levered to corn (which requires more fertilizer) than other companies. Cramer would buy Terra on Monday’s decline and would buy even more if it drops further.

CEO Interview: James Hackett, Andarko Petroleum (APC)

“What the heck has happened to oil and natural gas?” asked Cramer, puzzled by the steep decline in spite of a cold winter. James Hackett thinks natural gas prices will rebound as demand falls and production lessens. While markets were overbought, he now believes they are oversold. Hackett says Andarko is in a good position for exploration and production and has a strong balance sheet. While consolidation in the industry is likely, Hackett says the company is probably going to buy back its own stock rather than make an acquisition. Andarko is still Cramer’s favorite, especially since it is low and is a best-of-breed natural gas.

Outrage of the Day: Whatever Happened to Moral Hazard?

Cramer says he isn’t buying exiting Treasury Secretary Hank Paulson’s explanation for why Lehman was allowed to fall. He claims the government had no authority to rescue the falling giant and there wasn’t a buyer. However, a few days later, the government bought “the unfathomable” AIG which has been “just a gigantic black hole.” Cramer points out the collapse of Lehman was catastrophic for the world economy. So why didn’t those in power try to save Lehman? They were worried about the accusation of Moral Hazard and how it would have looked if the government would have bailed out a big bank. However, no one is talking about Moral Hazard now that everything is falling apart. Cramer thinks they should have thrown everything at the problem, and thinks it is high time Henry Pauslon owns up on his error before he leaves office; “You fooled Congress. You fooled the People. You fooled the Press. You haven’t fooled me,” Cramer said.

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Comments

[UncleFrank:]

Will Cramer or whoever writes his column please learn to spell "Anadarko?"

Jan 13 08:26 AM

[BHMTom:]

So what does Crammer think of the short and long term of AIG?

Jan 13 11:51 AM

[Norman Lepo...:]

DO NOT LISTEN TO CRAMER. I CHANGE THE CHANNEL WHENEVER I SEE HIS FACE!!!!!

Jan 14 11:45 AM